The Lifespan of Your Salary: Wages Stop Growing After Age 40

Statistics show that most of us enjoy steady raises in the first decade or so of our career. Little by little, we are able to buy more and nicer things, like cars, homes and morning mochas. But, does this joy ride of greater earnings (beyond adjustments for inflation) keep going? According to research by online salary database PayScale.com, it doesn't.

The raise train pretty much stops at 40 for the typical worker. For high school and college grads alike, workers in their 40s and 50s typically earn, at most, 10 percent more than those in their late 30s. This is a big adjustment in expectations, considering that workers usually earn almost twice as much by their late 30s as they did at the start of their career. There is even some evidence that wages decline for high school and bachelor's degree grads after age 55 (associate's grads generally hold steady after 55).

This change from pay growth to pay stagnation often comes as a shock to workers in their late 30s. At that age, it's not uncommon for someone to buy more house than they can afford, assuming they'll see continuing salary raises for the rest of their career.

This is a bad assumption, because the real raises (beyond adjustments for inflation) are pretty much over by this age. This has caused more than one foreclosure, when raises that were expected never came through.

From growing to slowing salaries

Let's take a look at how wages can change throughout a career.

For example, let's say a high school grad starts out as a file clerk, making $8 per hour, or $16,600 per year. By their late 30s, they will be earning, on average, close to $38,000 per year as an office manager. They have more than doubled their salary. However, in the next 10 years, their pay will not increase as dramatically, with this high school grad earning no more than about $50,000 per year for the rest of their career as an office manager.

Are there ways to keep earnings rising through your 40s?

The simple answer is no. The typical employee with the same degree will earn about the same from age 40 on. What other options are there? The pay numbers suggest getting a higher degree in your 40s or before is a way for high school and associate's grads to increase their earning potential.

There are jobs for high school and associate's grads (for example, master plumber or registered nurse) that match the typical mid-career earnings of bachelor's grads (approximately $66,000 per year), so getting a four-year degree isn't the only way to lock in a higher salary. Sometimes, choosing the right career to start is the key. If you have one of these jobs, going back to school for a bachelor's degree may not pay off.

However, the most common jobs high school degree grads take after graduation usually pay 45 percent less than those for workers with bachelor's degrees. For associate's degree grads the number is 30 percent less than typical bachelor's degree holders at mid-career.

For most high school grads, getting a bachelor's degree and moving into a better job will mean nearly twice the annual pay over the long term.

Inflation vs. additional spending power

To be clear, the doubling of pay between the late teens and late 30s is not in response to inflation. It is actually an increase in spending power.

For example, in 2011, the average pay for a person in their late 30s with a high school degree was about $36,000 per year. In response to inflation, a 39-year-old high school grad in 2031 will probably earn around $72,000 per year. However, that extra money won't buy any more stuff than $36,000 today (in 2011), since gas will likely cost $7 a gallon, and the $1 value menu cheeseburger will cost $2 (based on expected inflation rates).

The graph below based on PayScale data shows how annual pay changes with age, in 2011 dollars. The curves get mighty flat after age 40.